Music Service to Offer CD Swapping

Even with iTunes surpassing one billion song downloads and digital album sales beginning to take off, CDs remain the medium of choice for purchasing music. A new music sharing service, set to launch in July, plans to capitalize on that fact by offering customers the ability to swap real CDs rather than files.

Dubbed Lala Media and backed by $9 million in funding by Bain Capital and Ignition Partners, the company will encourage users to trade CDs they own for CDs they want at a cost of $1 plus a 49-cent shipping and handling fee. 20 percent of La la's revenues will go to recording artists, the company said.

Lala facilitates the transaction and provides prepaid envelopes to CD traders. The company's use of the postal service mirrors the way Netflix sends its customers rental DVDs.

While sharing of digital music has drawn the wrath of the recording industry, Lala says that CDs are protected under an exception to the U.S. Copyright Act. The company notes that owners of legally obtained physical media can transfer that disc to a new owner royalty free.

In a posting to the Lala Web site, co-founder Bill Nguyen touches on the topic of customers being able to simply make digital copies of CDs and immediately trade them. "I ask you to do your part by doing the right thing: remove songs from your iPod or PC if you've agreed to send the CD to another member," he says.

"If you want to listen to that CD again, just add it to your Want List and help us support that artist you can't get enough of. You'll have access to plenty of good music to enjoy in the meantime."

If a customer cannot find the album they want available for trade, a new copy can be purchased. Lala eventually plans to offer sales of digital albums as well, but not individual songs. The company says it is negotiating with the record labels for digital licenses.

Lala is in private beta testing and is currently slated to make its public debut on July 4, 2006.